MILWAUKEE (CN) - Stockholders of Koss Corporation, one of the nation's largest producers of hi-fi stereo headphones, say the company's Principal Accounting Officer went on "an unimaginable shopping spree - spanning more than 4 years and exceeding $31 million," making 4 years of the company's financial statements false and misleading.
The class claims that Sujata Sachdeva spent much of the money she looted on high-end jewelry, clothing and furs. Shareholders accuse her and Koss Corp. of violating securities laws.
When Sachdeva's spree was discovered, it caused trading in Koss stock to be shut down for three weeks, and when it resumed, the stock price dropped by 24 percent, according to the complaint.
Sachdeva also was vice president of finance for Koss. She was fired shortly after a federal criminal complaint was filed against her. That complaint states that Koss was tipped off to Sachdeva's financial improprieties by a security officer for American Express, who noticed that she was paying down her balance with large wire transfers from a Koss bank account.
The criminal complaint states that when CEO Michael Koss learned of the transfers, he went to her office, where he found several large piles of clothing that had price tags still attached - many of them for more than $2,000.
When the FBI arrived at her home, Sachdeva admitted that she was solely responsible for defrauding the company and admitted falsifying the company's bank account balance in an attempt to hide her purchases, according to an FBI agent's affidavit. A search of her home unveiled even more items with price tags intact. The affidavit accuses Sachdeva of defrauding Koss of more than $4.5 million.
The shareholders' class action claims the "spree" exceeded $31 million, "which defendant Sachdeva had done at the shareholders' expense."
The FBI agent's affidavit claims Sachdeva spent $670,000 at a single clothing store in Milwaukee, $127,400 at a jeweler's, $213,500 at another clothes store, $40,000 at a furrier, $225,000 at a jewelry store in Houston, $132,000 at another clothes store in Los Angeles, $1.4 million at a women's clothing store in Mequon, Wisc., $649,000 at a bridal salon in Whitefish Bay, Wisc., and so on.
Sachdeva was not the only one fired. According to the EarthTimes, Grant Thornton was let go as Koss' independent auditor and replaced with Baker Tilly Virchow Krause, which plans to audit the restatements of Koss Corp.'s financial statements for the fiscal years of 2005 through the present.
The shareholders seek costs and damages. Their lead attorney is Guri Ademi, with Ademi & O'Reilly of Cudahy, Wisc.
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.